# IMPLIEDSCENARIO

## Description

Solve for a modified set of implied scenario estimates given target probabilities. Reconcile your views on target scenario probabilities with implied scenario estimates across economic variables. The function follows the research published in the Journal of Portfolio Management, March 2020.

{% embed url="<https://doi.org/10.3905/jpm.2020.1.125>" %}
Journal of Portfolio Management research paper: Enhanced Scenario Analysis
{% endembed %}

## Syntax

The following describes the function signature for use in Microsoft Excel's formula bar.

```excel-formula
=IMPLIEDSCENARIO(prTarget, initialScenariosEstimates, anchor, covariance)
```

### Input(s)

| Argument                     | Description                                                                                                                                  |
| ---------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------- |
| **prTarget**                 | Required. Row vector of target probabilities.                                                                                                |
| **initialScenarioEstimates** | Required. Matrix of initial scenario estimates where each column corresponds to a scenario and each row corresponds to an economic variable. |
| **anchor**                   | Required. Column vector of anchor estimates across economic variables.                                                                       |
| **covariance**               | Required. Covariance matrix of economic variables.                                                                                           |

### Output(s)

The function returns a matrix of implied estimates, $$s\_{m,n}$$, across $$M$$ economic variables and $$N$$ scenarios. The reconciled probabilities, $$p$$, of the implied scenario estimates are included in the final row of output.

$$
\text{output} = \quad \begin{matrix}
s\_{1,1} & s\_{1,2} & \cdots & s\_{1,N} \\
s\_{2,1} & s\_{2,2} & \cdots & s\_{2,N} \\
\vdots & \vdots & \ddots & \vdots \\
s\_{M,1} & s\_{M,2} & \cdots & s\_{M,N} \\
\hline
p\_1 & p\_2 & \cdots & p\_N
\end{matrix}
$$

## Example

![](https://258561627-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MK66-MGuoULhqCDXLwy%2Fuploads%2Fs8O97ax5fRPc4AOg3579%2Fimage.png?alt=media\&token=402ea787-a99c-412a-ab87-b40a49ae89ff)

{% file src="<https://258561627-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-MK66-MGuoULhqCDXLwy%2Fuploads%2FkX39C50MdMP5SExG9oN1%2FIMPLIEDSCENARIO.xlsx?alt=media&token=72673462-d3b8-4216-8e54-eb9ecb7aab1a>" %}
Example Workbook: IMPLIEDSCENARIO
{% endfile %}